Tuesday, August 04, 2015

Tom Hayes gets thoroughly deserved deterrent prison sentence.

In those words, Mr Justice Cooke, sealed the fate of Tom
Hayes, the first organised criminal to be convicted of manipulating the LIBOR
rate.

Others are waiting in the wings!

But the Judge did more than that. He also set the seal on
the final determination of the character of the reputation of the City of
London banking sector, identifying, once and for all, its inherently organised
criminal nature.

The Judge has sent a very loud message to the UK banking
industry, warning that its ‘dishonest and wrong’ conduct would not be tolerated
any more. The Judge identified the core nature of the illegal and dishonest
conduct of the financial sector when he said that senior bankers had ‘...condoned,
embraced and even encouraged Hayes’ activities...’ and a message needs to be
sent to the world of banking accordingly.

The Judge hammered home the need for the reputation of
products such as LIBOR to be maintained, and that probity and honesty was
essential in the running of the Square Mile.

So, let us hear no more of the so-called ‘fine reputation
and clean record’ of the City banking sector. Let the message go out to the
BBA, and all the other cosy clubs and trade associations in the Square Mile which
seek to support the banking industry, that their dreadful criminal reputation
has been finally nailed to the door of history for everyone to see.

One of their own, a man in a position of immense trust
and financial power has been held out to dry in the eyes of a disbelieving
world as a crook, a cheat, a sponger, a man who pimped the reputation of his
desk to steal inordinate profits for his house, and to make money for his back trouser
pocket in the form of massive bonuses.

He was the man whose existence is always denied by the
senior bankers in their plush offices on the 5th floor when the word
starts to trickle out that something is rotten in the financial sector.

So, no more ‘rotten apple’ theory please, no more ‘rogue
trader’ nonsense, Tom Hayes is the gatekeeper to a procession of shabby white
socked yobs, spivs and wideboys who will soon be appearing in a Palais de
Justice near you, to be tried for their alleged crimes.

But this is not the end of the story.

Oh no, this is just the start, because behind what you
may have read reported, there lies another, altogether too fanciful tale of deviousness,
and shocking cynicism, which might have succeeded but for some superb
investigation and a lot of moral courage on the part of the Serious Fraud
Office.

Running in parallel with the SFO criminal investigation,
was a US investigation, and Tom Hayes was firmly in their sights. They wanted
Hayes in the United States being sweated in the hot seat, and had the US
authorities been successful in obtaining his extradition, Hayes would have been
facing a lengthy prison sentence in a state penitentiary, coupled with the need
to have provided full cooperation with the US authorities to bring prosecutions
against other defendants.

So Tom Hayes, the man who had spent years, gaming the
LIBOR system, decided to game the Criminal Justice process. In so doing, the
man who had so manifestly flouted any vestige of ethical conduct in his
commercial dealings, set out to flout the ethical process of the English
prosecution system.

In the course of preparing for a criminal trial, it is
perfectly proper for a putative defendant’s lawyers to approach the prosecutor
and seek to ascertain their view to a selected series of pleadings to specific charges.
However, once an agreement has been reached, it is ethically improper for a
defendant then to seek to avoid the consequences of his agreements.

According
to Hayes, the FBI’s interest – and specifically the possibility of extradition
to the US and a theoretical 90-year prison sentence – shaped what happened
next.

Terrified
of extradition to the United States, he hired lawyers to approach British
investigators to offer his cooperation with their investigation.

"I
had one focus and one focus only which was not to be flown to El Paso in Texas,
a maximum security prison, without my wife, without my son," he said at
trial. "I didn't think about innocence, guilt or anything. My only
consideration at the time was getting charged (in Britain) and avoiding
extradition."

So,
we are now expected to believe that Hayes made up all these hours of interviews
and admissions simply in order to get charged with offences in the UK,
believing, wrongly, that this would pre-empt his extradition to the USA.

His
lawyers wrote to the SFO in January 2013 saying Hayes had decided to cooperate,
and during a subsequent 82 hours of interviews he appeared to acknowledge his
crimes and implicated 25 other conspirators.. When asked if he admitted acting
dishonestly in the manipulation of Libor, he replied: “Yes, I admit that I was
dishonest and was dishonest within an environment that was prevalent among all
the banks, yeah.”

Hayes
added: “There is no way that I’m the only Libor manipulator in the world. It’s
just not possible. I might be the most open about it and I’ve left reams of
evidence.”

The
SFO’s case was that Hayes had become the “ringmaster” of Libor rigging to
increase his own trading profits and that he rewarded brokers influencing the
rate on his behalf with so-called “wash trades” – trades that were financially
neutral for Hayes on which he paid brokerage fees. “I don’t care, right, just
get me any fucking trade which pays you basically today, mate,” he messaged one
alleged co-conspirator. “If you keep [Libor] unchanged today, yeah, I will
fucking do one humungous deal with you.”

The
SFO had every reason to believe that Hayes was going to cooperate and give
evidence against others, as he had agreed to during his interviews. This was
why he appeared at Court on his own, without other defendants, because in order
to give evidence against any others, he would have had to have pleaded guilty
and been sentenced before any new trial.

But how were the SFO to know that the man
who had so routinely avoided complying with any ethical rules of the market he
traded, was going to be just as cavalier with the agreements the SFO had
thought he was making with them.

If
SFO officers believed their suspect was about to plead guilty, they were to
receive a very rude awakening. At his trial, having changed his lawyers (for
reasons we may only guess at but I suspect that his original lawyers felt they
could not go back on their agreements with the SFO), Hayes pleaded not guilty
at Southwark crown court to eight counts of conspiracy to defraud.

This
is always the problem with people who have lost all sight of any moral precept
or ethical standard, you cannot trust them in anything, because they will say
anything they think will help their cause no matter how daft it turns out to
be.

Hayes
attributes his change of heart to a sense of anger and betrayal at the behaviour
of his employers in hanging him out to dry and blaming all the wrongdoing on
him. I do not believe this.

This
so-called very clever man, was not sufficiently clever by half, because by
pleading not-guilty after all the hours of making self-implicating statements
and admissions to the SFO in interviews, the only route left for him was to
seek to claim that his conduct was not dishonest.

This
of course, was the only legal avenue left open to him, and I am very surprised
that his new lawyers (who were granted legal aid for some bizarre reason to
defend this multi-millionaire) connived in the change of plea. They must have
advised him of the huge risks he was running and although they were within
their rights to accept the change of plea if their client’s instructions were
that he genuinely believed he was not acting dishonestly, they must have first
asked themselves why he made the self-incriminating statements in the first
place, and if they formed the view that he was just gaming the system, then
they would have warned him of the consequences he faced in sentencing.

I suspect
(and let me say I have no evidence to support this, except for 40 years of police
and criminal justice experience), that in the interim period between giving his
statements to the SFO and his trial, that Hayes and his evidence on tape to the
SFO, and his offer to give evidence against his co-defendants would have become
known right across his former operating sector.

Many
City traders are unethical and criminogenic by nature, and there is a strong
degree of likelihood that Tom Hayes would have been aware of the risks he would
run in giving evidence against others. There are plenty of dangerous and
vicious men in London who mix in the same milieu as the drug-snorting, champagne-swilling
high-octane world of the millionaire bank broker, men who would think nothing
of taking a contract to eradicate Hayes if the right money was on the table.

I
suspect that fear for his future well-being drove Hayes’s decision to change
his plea and in many respects, this would have suited all the other defendants
because they would have been given a chance to see the strength of the SFO’s
case, as well as reflect on any sentence Tom Hayes might receive.

Well,
he has got 14 years, and rarely was a sentence so richly deserved.

He
has been given what is called a deterrent sentence, one which is intended to
send a very important message to the market sector in which Tom Hayes once
worked.

The
Judge has let it be known that the Courts will not tolerate criminal behaviour
by the City elites and that their adherence to honesty and good conduct is as important
as to anyone else.

This
trial has sent a clear message to the City spiv demi-monde that they are
subject to the same rules and regulations as any other person and dishonesty will
be punished severely.

The purpose of a deterrent sentence is aimed at deterring
the offender from ever committing a similar offence, but more importantly in
some sectors, deterring others from committing similar offences.

We
have long needed such a finding such as this because the City has been allowed
to become a moral sink, an ethical desert, and widespread criminal offences
have been committed by brokers and traders, enriching their employing institutions,
and by so doing, being paid huge bonuses.

Some
may say that 14 years is too long and not a deterrent.

Well,
I say that it is a fine sentence, the sort I have been advocating for years,
and will send a very strong message to the market. The judge has laid down an
important benchmark, ‘...you commit these kind of crimes, and this is the sort
of sentence you can expect...’

Financial traders and brokers are the arch
exponents of calculating the risk/reward ratio for every trade they do. After today,
the risks will far outweigh the rewards.

I
expect that the telephones in the SFO’s offices are ringing off the hook today
with solicitors phoning for appointments to come in and discuss plea bargains
for their clients still awaiting trial on LIBOR manipulation charges. There is
no way that any other accused person is going to try and run the gauntlet with
this kind of sentence waiting to be collected for guessing wrong.

Oh, and
guess what, Tom Hayes can and probably will still be extradited to the US to
face investigation for his breach of US laws, so he has got that to look
forward to as well.

About Me

Having spent my career dealing with financial crime, both as a Met detective and as a legal consultant, I now spend my time working with financial institutions advising them on the best way to provide compliance with the plethora of conflicting regulations and laws designed to prevent and forestall money laundering - whatever that might be! This blog aims to provide a venue for discussion on these and aligned issues, because most of these subjects are so surrounded by disinformation and downright intellectual dishonesty, an alternative mouthpiece is predicated. Please share your views with what is published here from time to time!